Hawaii is America’s Worst State for Business in 2026

Hawaii has some built-in disadvantages in nearly every state’s competitiveness rankings. Its location makes almost everything expensive. Its size limits development. And many of the usual infrastructure measures do not apply; for example, freight rail service is crucial on the mainland but irrelevant on the Pacific island chain.

That’s why the Aloha State, this year’s Bottom of Business in CNBC’s rankings, focuses on the things it can control; Chief among these is access to child care.

“We know that early learning is truly critical to the health and development of our children,” said Yuuko Arikawa-Cross, Director of Hawaii’s Executive Office of Early Learning. “We also know that in approximately 60% of households with children in Hawaii, all adults are working.”

But child care in Hawaii is the most expensive in the country, costing 18 percent of the average income of a married couple with children. Child Care Aware of America. With 531 licensed child care facilities in the state of 1.4 million people, Hawaii ranks 21st in child care centers per capita. National Early Education Research Institute He said Hawaii met all of the organization’s quality criteria last year but ranked near the bottom in terms of access.

That poor performance helps push Hawaii to the bottom of CNBC’s overall rankings this year, hurting Quality of Life, the one category that has kept the state out of the cellar for most years.

Hawaii finished this year in 6th place in the category it had previously dominated. This means the worst results in the state in Infrastructure and Cost of Doing Business, and less compensation in terms of the fourth-highest Cost of Living.

Childcare emerges as major competitive issue

CNBC began factoring in child care in 2022. US Chamber of Commerce identified this as the top reason why employees quit their jobs or do not return to work.

Hawaii also took up the issue around the same time and created a law Mandates that early learning or pre-kindergarten programs be offered to half of the state’s three- and four-year-olds by 2020 (no later than 2027) and to 100% of them by 2032.

Arikawa-Cross said the province is on track to meet the 50% target as planned next year.

“We’ve really made a huge, concerted effort to revive this initiative,” he said.

Whether the state can hit the 50 percent goal next year or the mandated 100 percent goal in less than six years may depend on more problems that are difficult for Hawaii to control.

Already, early childhood learning programs face intense funding pressure at the state and local level.

Arikawa-Cross said officials are closely examining the specter of federal budget cuts to the Head Start program, even though her office does not receive direct federal funding except for one position.

Key defender in Hawaii steps aside

Another factor has less to do with financing and more to do with momentum.

The state’s biggest advocate for early childhood education is Lt. Gov. Sylvia Luke, who founded the state’s early learning initiative. Ready Keiki – In 2023 (keiki is the Hawaiian word for children). The program has established a network of partners including government agencies, nonprofits, and philanthropic organizations to help achieve the goal of universal child care.

But Luke announced in April that he would be taking an indefinite leave of absence after confirming he was the target of the state’s campaign finance investigation. Luke suspended his re-election campaign, although he did not admit wrongdoing. A state campaign spending commission this month announced He said he filed multiple civil complaints against Luke and five others in May. Luke’s lawyers asked for the civil case to be postponed due to the ongoing criminal investigation.

No matter how the case turns out, Hawaii’s child care efforts are without their biggest advocate as the first major deadline under the law approaches.

“It was very important to have a cheerleader and someone who would support your cause and know the importance of it,” Arikawa-Cross said. “There is a huge gap right now, and our office does not want to lose momentum.”

The work will continue, he said, even if it lacks the high-profile champion it once had.

“We need to stay together and see it through to the finish line and beyond,” he said. “We’ve made so much progress, let’s not stop now. We still have a lot of work to do.”